About That Economic Stimulus Plan That’s About to be Passed…

You know, the President’s plan that’s supposed to give hundreds, or even thousands of tax rebate dollars back to American families? The one that’s supposed to keep the U.S. economy from going into the tank?

It won’t do much, if anything, to help the economy, and is the latest Washington example of “well, we have to do something.

First of all, if you want to stimulate economic growth, you have to encourage increased productivity and/or wealth creation. A rebate check does neither of these since it’s “money for nothing”, and won’t even necessarily increase consumer spending. People might use it to pay down credit card debit or might even save it. So while history tells us they’ll most likely go out and blow it, there’s no guarantee.

Second, by the time this bill gets passed through the Senate, makes it through conference committee, and is signed by the President, we’ll easily be in March. Then, since we’re talking about the IRS here, it will take an additional 3-4 months for them to print and mail out millions of rebate checks to American families – bringing us to June at the earliest. This is way too long. An entire quarter will elapse before this money even gets into the hands of taxpayers, giving the economy 1/4th of the year to continuing its decline into recession. If politicians want any hope of this positively affecting the economy, this money has to get to people now, something that is logistically impossible.

Third, since our Government is trillions of dollars in debt already, it’s not like we have the extra $160 billion dollars for this plan just sitting around. It’s got to come from somewhere, and that means we and our children will be paying for it for years to come. So, it’s really a tax increase on future taxpayers. Nice.

As you can tell, I’m very pessimistic about the entire idea of this “stimulus” plan. It’s being done to create the appearance of political action, an is an obvious election year ploy. There aren’t many quick fixes for a dynamic economy such as ours – especially after continuing fallout from the burst of the mortgage bubble. Longer term, things like decreased marginal tax rates and encouragements to invest in technology and renewable energy – things that actually grow the economy – are going to make the biggest difference.

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